The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: Municipal Advisors

  • From Vol. 9 No.40 (Oct. 13, 2016)

    How Developments With California’s Pension Plan Disclosure Law, the SEC’s Rules and FINRA’s CAB License May Impact Hedge Fund Managers and Third-Party Marketers

    Hedge fund managers and many service providers have faced a wave of new regulatory requirements since the 2008 global financial crisis. This is particularly true for third-party marketers engaged by hedge fund managers to solicit clients and fund investors, which may be subject to a barrage of regulations at the federal, state and local level depending on the nature of their business. To explore some of the latest regulatory challenges faced by funds and their marketers, The Hedge Fund Law Report recently interviewed Susan E. Bryant, counsel at Verrill Dana LLP, and Richard M. Morris, partner at Herrick, Feinstein LLP. This article sets forth the participants’ thoughts on a host of issues, including new disclosure requirements for state pension plan investors; recent enforcement trends; and new rules adopted by the SEC, FINRA, Municipal Securities Rulemaking Board (MSRB) and state regulators. On Thursday, October 20, 2016, from 10:30 a.m. to 11:30 a.m. EDT, Morris and Bryant will expand on the topics in this article – as well as other issues that affect hedge fund managers and third-party marketers – during a panel moderated by Kara Bingham, Associate Editor of the HFLR, at the Third Party Marketers Association (3PM) 2016 Annual Conference. For more information on the conference, click here. To take advantage of the HFLR’s $300 discount when registering for the conference, click the link available in the article. For prior coverage of a conference sponsored by 3PM, see “Third Party Marketers Association 2011 Annual Conference Focuses on Hedge Fund Capital Raising Strategies, Manager Due Diligence, Structuring Hedge Fund Marketer Compensation and Marketing Regulation” (Dec. 1, 2011).

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  • From Vol. 7 No.31 (Aug. 21, 2014)

    OCIE Letter Foreshadows Examination Activity Focused on Municipal Advisors

    On August 19, 2014, the SEC’s Office of Compliance Inspections and Examinations (OCIE) published a letter announcing its intention to examine certain municipal advisors (MAs) that must register with the SEC between July 1 and October 31, 2014 and that are not registered with FINRA.  In its letter addressed to MA senior executives and principals, OCIE explained that it will be examining a “significant percentage” of the newly registered MAs through a National Exam Program (NEP).  MAs must register with the SEC under Section 975 of Dodd-Frank, which amended Section 15B of the Securities Exchange Act of 1934, and they owe fiduciary duties to the municipal pension funds that they advise.  Hedge fund managers should understand the SEC’s agenda concerning the upcoming MA examinations because certain pension fund advisers – critical gatekeepers between hedge fund managers and the considerable volume of retirement assets available for investment – may be deemed to be MAs and therefore scrutinized as part of NEP’s initiative.  See “Getting to Know the Gatekeepers: How Hedge Fund Managers Can Interface with Investment Consultants to Access Institutional Capital (Part One of Two),” The Hedge Fund Law Report, Vol. 6, No. 27 (Jul. 11, 2013).  In turn, hedge fund managers should understand the total range of concerns bearing on the entities to which they market, or on the intermediaries serving those entities; to the extent pension consultants are under increased examination pressure, managers’ marketing efforts, other things being equal, are more likely to be successful if they take those pressures into account.

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  • From Vol. 3 No.44 (Nov. 12, 2010)

    Municipal Securities Rulemaking Board Extends Its Regulatory Reach to Include Hedge Fund Placement Agents

    On November 1, 2010, the Municipal Securities Rulemaking Board (MSRB) filed proposed rule changes with the Securities and Exchange Commission (SEC).  See “Third-Party Marketers that Solicit Public Pension Fund Investments on Behalf of Hedge Funds May Have to Register with the SEC within Three Weeks,” The Hedge Fund Law Report, Vol. 3, No. 35 (Sep. 10, 2010).  Those proposed rule changes are of interest to the hedge fund community for five primary reasons.  First, they clarify the definition of a “municipal advisor” for purposes of Section 975 of Dodd-Frank.  That definition likely encompasses placement agents providing services to hedge funds and other entities that provide similar services to hedge funds but call themselves something else (such as “finders,” “solicitors” or “cash solicitors”).  Second, the proposed rule changes impose three procedural requirements on municipal advisors.  Third, they impose two substantive requirements on municipal advisors.  Fourth, the MSRB’s Notice 2010-47 (Notice), announcing the filing of the proposed rule changes, includes a roadmap of the MSRB’s rulemaking agenda for “the coming months and years,” including rules that will directly affect hedge fund placement agents.  Fifth, the Notice contains a portentous endnote relating to the “federal fiduciary duty” of municipal advisors, and the entities to whom that duty is owed.  This article discusses each of these five points – and identifies the questions that placement agents have to ask and answer today based on these points.

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